INDICTMENT COUNTS ONE THROUGH THREE...

IN THE UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF PENNSYLVANIA

UNITED STATES OF AMERICA )) Criminal No.

v. ) (18 U.S.C. §§2, 371, ) 666(a)(1)(B), 1341;) 26 U.S.C. §7206(1))

NICHOLAS TROMBETTA ) [UNDER SEAL]NEAL PRENCE )

INDICTMENT

COUNTS ONE THROUGH THREE

(18 U.S.C. §1341)

Fraud Involving Wingspan and BOSS

The Grand Jury charges:

Introduction

At all times material to this Indictment:

1. The defendant, NICHOLAS TROMBETTA, was the founder

and Chief Executive Officer of an entity known as the Pennsylvania

Cyber Charter School (hereinafter PA Cyber). As CEO of PA Cyber

his annual salary for 2008 through 2012 ranged from approximately

$127,000 to $141,000.

2. PA Cyber, founded in and around 2000, was a school

that provided online educational services, that is, school courses

in a wide range of subjects (math, English, history, etc.)

delivered over the internet to a student's home computer, and, by

-1-

2011, to more than 10,000 students, from kindergarten through the

twelfth grade, throughout the Commonwealth of Pennsylvania. PA

Cyber operated as a Pennsylvania non-profit corporation with its

headquarters located at 1200 Midland Avenue, Midland, PA. (A cyber

charter school is a self-managed public school and for all intents

and purposes functions as a public school district, like any other

in Pennsylvania, except that its course offerings are provided to

the students via computer over the internet, that is, "online," and

it draws students from a broader geographical area which may

include the entire state of Pennsylvania.)

3. PA Cyber was funded by federal, state and local tax

revenues. For each child that attended PA Cyber, that child's home

school district would provide payment to PA Cyber of approximately

80% of the cost of educating that child in his or her home school

district. From 2006 through 2012, PA Cyber had revenue that ranged

from approximately $38,000,000 per year to in excess of

$115,000,000 per year.

4. The National Network of Digital Schools Management

Foundation (hereinafter "NNDS") was a Pennsylvania non-profit

corporation with its main office located at 1000 Third Street in

Beaver, Pennsylvania. NNDS was founded in or around 2005 by

Defendant NICHOLAS TROMBETTA. NNDS provides educational management

services and online course materials (curriculum) for cyber

-2-

education. Throughout the period of this Indictment the

substantial majority of the income of NNDS came from PA Cyber

through a management services contract between NNDS and PA Cyber

and from NNDS's sale of curriculum to PA Cyber. From 2006 through

2011 NNDS had revenue that ranged from approximately $22,000,000

per year to in excess of $50,000,000 per year. NNDS entered into

a management services contract with an entity known as the Avanti

Management Group (AMG) whereby NNDS agreed to pay AMG a percentage

of its revenue in exchange for various services. From the time of

its founding until Defendant NICHOLAS TROMBETTA retired as CEO of

PA Cyber in July of 2012, Defendant NICHOLAS TROMBETTA effectively

controlled the management and operation of NNDS.

5. The Avanti Management Group (hereinafter AMG) was a

for profit company founded by Defendant NICHOLAS TROMBETTA in 2008.

Throughout the period of this Indictment the substantial majority

of AMG's income came from the management services contract that AMG

had with NNDS. By the terms of the contract, which was put in

place by Defendant NICHOLAS TROMBETTA, AMG agreed to provide

management services to NNDS. From 2008 through 2011 AMG had

revenue that ranged from approximately $900,000 in 2008 to over

$9,200,000 in 2011. Nearly all of this revenue was from the

contract with NNDS.

-3-

6. Defendant NICHOLAS TROMBETTA recruited persons known

to the grand jury as RB, BG, RM and JP to serve as "straw" owners

of AMG, that is, as persons who would take direction regarding the

operation and management of AMG from Defendant NICHOLAS TROMBETTA.

AMG was founded based on an explicit agreement entered into by and

between Defendant NICHOLAS TROMBETTA and the four straw owners.

The substance of this agreement was that the four straw owners

would be the "on paper" owners and operators of AMG for a period of

time, at the end of which Defendant NICHOLAS TROMBETTA would assume

an eighty percent (80%) ownership share of AMG and the "on paper"

ownership share of each of the straw owners would drop from twenty

five percent (25%) to five percent (5%). In exchange for each of

the straw owners agreeing to relinquish their respective twenty

five percent share of the ownership, each of the original straw

owners was to receive a $500,000 payment. From the founding of AMG

in 2008 until he retired as CEO of PA Cyber in July of 2012,

Defendant NICHOLAS TROMBETTA effectively controlled the personnel,

operations and resources of AMG.

7. The Buckeye Online School for Success (hereinafter

BOSS), an Ohio based provider of cyber/on-line education, was

founded by Defendant NICHOLAS TROMBETTA and others in 2003. From

2003 through 2006 Defendant NICHOLAS TROMBETTA exerted substantial

influence over the operations and personnel of BOSS.

-4-

8. Wingspan, LLC and Wingspan New Mexico (hereinafter

Wingspan) were companies owned and operated by persons known to the

grand jury as ST and CS. During the time frame 2004 – 2006,

Wingspan was involved with Defendant NICHOLAS TROMBETTA in an

effort to promote and sell on-line education to school districts in

New Mexico that had a significant population of Native American

students.

9. One2One Enterprises (hereinafter One2One) was

founded in January of 2006 by Defendant NICHOLAS TROMBETTA and his

sister, Elaine Trombetta Neill (not charged herein). One2One was,

in theory, a company that provided research and business

development consulting but, in truth and in fact, Elaine Trombetta

Neill had no experience or expertise in business development or

consulting. In actuality, One2One served as a vehicle to allow

Defendant NICHOLAS TROMBETTA to use his position of influence over

PA Cyber, NNDS, AMG, BOSS, Wingspan and other entities in the

private sector to covertly channel money to himself, to Elaine

Trombetta Neill, to other family members and to other persons.

One2One was not a part of, nor in any way affiliated with, either

PA Cyber or NNDS, but was instead wholly owned and controlled by

Defendant NICHOLAS TROMBETTA and his sister, Elaine Trombetta

Neill. One2One was listed as a Schedule C business on the joint

tax returns filed by Elaine Trombetta Neill and her spouse.

-5-

10. Martlin Management was a company owned and operated

by an individual known to the grand jury as MD. During the time

frame of the scheme to defraud, Defendant NICHOLAS TROMBETTA used

Martlin Management to collect money from BOSS and Wingspan and

forward that money to One2One to be deposited into the One2One bank

account.

11. In the annual reports of PA Cyber the defendant

NICHOLAS TROMBETTA was identified alternately as the "Chief

Executive Officer" (hereinafter CEO) or "Superintendent" of PA

Cyber and as such he qualified under the Pennsylvania Public

Official and Employee Ethics Act as a "Public Employee".

THE SCHEME

12. From in and around 2004, and continuing thereafter

until in and around November 2008, in the Western District of

Pennsylvania and elsewhere, the defendant, NICHOLAS TROMBETTA,

devised and intended to devise a scheme and artifice to defraud PA

Cyber and NNDS and for obtaining money and property from PA Cyber

and NNDS by means of false and fraudulent pretenses,

representations and promises, well knowing at the time that the

pretenses, representations and promises were false and fraudulent

when made, which scheme and artifice to defraud, was in substance

as follows:

-6-

13. It was a part of the scheme and artifice to defraud

that the defendant, NICHOLAS TROMBETTA, used his influence and

control over employees of PA Cyber and NNDS to enrich himself. He

did this by using PA Cyber and NNDS employees to perform work for

out of state companies (such as BOSS and Wingspan) and then

secretly directed payments from these out of state companies to

himself and his sister. Pursuant to the instructions of Defendant

NICHOLAS TROMBETTA, payments from these companies were deposited to

the bank account of One2One when, in fact, One2One had not

performed any work or provided any service.

14. It was further a part of scheme and artifice to

defraud that the defendant, NICHOLAS TROMBETTA, caused employees of

PA Cyber and NNDS to travel to New Mexico and to otherwise do work

for, on behalf of and for the benefit of the entity identified as

Wingspan, a company attempting to promote on-line education in

school districts in New Mexico that had a significant Native

American population. These employees of PA Cyber, and later NNDS,

provided services and various areas of consultation and technical

support, including curriculum utilization and development,

information technology and computer utilization, all while being

compensated solely by PA Cyber and/or NNDS.

15. It was further a part of the scheme and artifice to

defraud that the defendant, NICHOLAS TROMBETTA, in and around late

-7-

2005 or early 2006, caused an individual known to the grand jury as

MD to collect $62,500 owed by Wingspan to PA Cyber and/or NNDS, for

services and/or materials that had been provided in connection with

efforts to promote on-line education in New Mexico. After MD

collected $62,500 from Wingspan, Defendant NICHOLAS TROMBETTA

instructed MD to forward the funds to One2One, rather than to PA

Cyber or NNDS.


defraud that Defendant NICHOLAS TROMBETTA then deposited and caused

to be deposited to the One2One bank account, the $62,500 in

payments from Wingspan (through Martlin Management) for the

services and/or materials provided to Wingspan's on-line education

project in New Mexico by employees of PA Cyber and NNDS.


defraud that the defendant, NICHOLAS TROMBETTA, caused employees of

PA Cyber and NNDS to travel to Ohio and to do work for, on behalf

of and for the benefit of BOSS, an Ohio based cyber school. These

employees of PA Cyber and NNDS provided services in the areas of

human resources consultation, special education consultation,

public relations, information technology, computer utilization, the

provision of email and in other areas, all while being compensated

solely by PA Cyber and NNDS.

-8-


defraud that Defendant NICHOLAS TROMBETTA, throughout the time

frame of the scheme to defraud, caused an individual known to the

grand jury as MD to collect more than $600,000 owed by BOSS to

NNDS, for services and/or materials that had been provided in

connection with the work of BOSS. After MD collected more than

$600,000 from BOSS, Defendant NICHOLAS TROMBETTA instructed MD to

forward $400,000 to NNDS and more than $200,000 to One2One.


defraud that the defendant, NICHOLAS TROMBETTA, caused PA Cyber

employees and resources to be utilized to provide "virtual"

classroom teaching and courses to students associated with Wingspan

in New Mexico and with BOSS in Ohio.


defraud that the defendant, NICHOLAS TROMBETTA, in and around late

2005 or early 2006, approached the management of BOSS and advised

that the services that had previously been provided by employees of

PA Cyber and NNDS, without cost to BOSS, would no longer be

provided free of charge. However, Defendant NICHOLAS TROMBETTA

advised BOSS that he (TROMBETTA) would arrange for the same

services to be provided to BOSS by One2One (see paragraph 9 above)

for a fee of $6500 per month, payable to One2One.

-9-


defraud that the defendant, NICHOLAS TROMBETTA, used his influence

and control over operations and personnel of PA Cyber and NNDS to

fulfill the obligations of the agreement between BOSS and One2One

by continuing to utilize the employees of PA Cyber and NNDS to

provide services to BOSS. None of the employees of PA Cyber and

NNDS who did work for BOSS were aware of the arrangement created by

Defendant NICHOLAS TROMBETTA between One2One and BOSS. Nor were

they aware that, at Defendant NICHOLAS TROMBETTA'S direction, BOSS

was paying One2One $6500 per month, to the personal benefit of

Defendant NICHOLAS TROMBETTA.


defraud that from early 2006 through November of 2008, false and

fraudulent invoices, on One2One letterhead, were prepared and sent

from One2One in Aliquippa, PA, in the Western District of

Pennsylvania, through the mail to the offices of BOSS in eastern

Ohio. These false and fraudulent invoices, in the amount of $6500

a month, were itemized for services supposedly provided by One2One

to BOSS including "Technical Support", "Curriculum Development",

"Professional and Leadership Development", "Web Site Revisions",

"Title I and Special Ed Compliance", "Administrative Coaching

Sessions", "Strategic Planning Sessions", "Analysis of Admission

Trends and Marketing Needs", "Server and Storage Update" and "On

-10-

Site Visits by Educational Consultant." The invoices were false

and fraudulent in that One2One had no employees, no expertise to

offer, provided no services or support to BOSS and in truth and in

fact did nothing for BOSS but send invoices outlining charges for

services that One2One had not in fact provided. Each invoice sent

by One2One to BOSS throughout the period 2006 through 2008 resulted

in a check being issued on behalf of BOSS and sent back through the

mail to One2One in Aliquippa, PA, in an amount corresponding to the

charges itemized on the invoice, almost always $6500.


defraud that the services which were provided to BOSS throughout

the period 2006 through 2008, as Defendant NICHOLAS TROMBETTA well

knew, were not in fact provided by One2One, but continued to be

provided by employees of PA Cyber and NNDS at the direction and

under the control of Defendant NICHOLAS TROMBETTA. The employees

of PA Cyber and NNDS who performed the services for the benefit of

BOSS in Ohio received no additional compensation for this work

beyond the salaries they were paid by their employers, PA Cyber and

NNDS.


defraud that the creation of One2One, the utilization of false and

fraudulent invoices from One2One to BOSS, and the payments sent by

BOSS to One2One, all resulted from Defendant NICHOLAS TROMBETTA's

-11-

position as CEO of PA Cyber, and were conducted in such a manner as

to conceal payments that provided income to Defendant NICHOLAS

TROMBETTA in addition to his PA Cyber salary.

25. It was further a part of scheme and artifice to

defraud that in 2006 Defendant NICHOLAS TROMBETTA deposited and

caused to be deposited to the One2One bank account, $59,000 in

payments from BOSS for services provided to BOSS by employees of PA

Cyber and NNDS.





Cyber and/or NNDS.





Cyber and/or NNDS.


defraud that throughout the period 2006 through 2008, neither the

Board of Directors of PA Cyber nor the Board of Directors of NNDS

were aware of, nor approved of, the arrangements between Defendant

NICHOLAS TROMBETTA and Wingspan and Defendant NICHOLAS TROMBETTA

-12-

and BOSS, both of which resulted in payments flowing to the bank

account of One2One, said payments constituting compensation for

work performed by PA Cyber and NNDS employees.


defraud that from 2006 through 2008, Defendant NICHOLAS TROMBETTA

utilized an ATM/Debit card to access funds in the One2One bank

account to pay for purely personal expenses such as grocery bills,

restaurant charges, personal travel and other personal

expenditures.


defraud that from 2006 through 2008, Defendant NICHOLAS TROMBETTA

and his sister, Elaine Trombetta Neill, had the use and beneficial

enjoyment of more than $440,000 that flowed through the One2One

bank account from payments made by Wingspan and BOSS for services

and/or materials that were actually provided by employees of PA

Cyber and NNDS.

31. On or about the dates listed below, each date and

event constituting a separate count, in the Western District of

Pennsylvania, for the purpose of executing or attempting to execute

the above described scheme and artifice to defraud, Defendant

NICHOLAS TROMBETTA knowingly caused his sister, Elaine Trombetta

Neill, to take and receive from an authorized depository for mail

the following matters, that is, envelopes mailed from the

-13-

Educational Service Center in Ohio containing checks bearing the

check number and date indicated and for the amounts shown, mailed

on behalf of BOSS to One 2 One in Aliquippa, PA, in response to an

invoice sent as described above:

Count No. Check No. MailingDate/On orAbout

Amount ofCheck

Recipientof Mailing

One 013078 August 28,2008

$6500 ElaineNeill, dbaOne2OneEnterprises611 OwensStreet,Aliquippa,PA 15001

Two 013377 October 13,2008


Three 013595 November10, 2008


All in violation of Title 18, United States Code,

Sections 1341 and 2.

-14-

COUNT FOUR

(18 U.S.C. §666(a)(1)(B))

Fraud Involving Computer Purchases by PA Cyber in 2009 and 2010

The Grand Jury further charges:

32. The allegations of Paragraphs 1 through 3 above are

realleged and incorporated herein by reference thereto as though

they were fully set forth herein.

33. At all times material to this Indictment,

Pennsylvania Cyber Charter School (hereinafter PA Cyber) was an

organization that received federal funds in excess of $10,000

during the one-year period beginning January 1, 2010, and ending

December 31, 2010.

34. At all times material to this Indictment, Defendant

NICHOLAS TROMBETTA, as Chief Executive Officer of PA Cyber, was an

"agent" of PA Cyber as defined in Title 18, United States Code,

Section 666(d)(1). His duties included supervision of the

procurement process whereby PA Cyber entered into contracts for

goods and services on behalf of its students, such as the purchase

of computers for use by PA Cyber students.

35. The allegations of Paragraph 5 above regarding The

Avanti Management Group (hereinafter AMG) are realleged and

-15-

incorporated herein by reference thereto as though fully set forth

herein.

36. At all times material to this Indictment, a

technology company known to the grand jury (hereinafter Technology

Company) manufactured personal computers for use in the on-line

cyber education market. In 2009 and 2010, the Technology Company

was awarded a contract by PA Cyber to supply laptop computers to PA

Cyber for use by PA Cyber's students. This contract involved the

sale by the Technology Company to PA Cyber of 3000 laptop computers

in 2009 and 4000 laptop computers in 2010.

37. In and around December of 2010 in the Western

District of Pennsylvania, Defendant NICHOLAS TROMBETTA did accept

and agree to accept, a thing of value, that is, a payment totaling

$350,000 from the Technology Company to AMG, intending to be

influenced and rewarded in connection with a transaction and series

of transactions of PA Cyber, that is, the purchase of computers by

PA Cyber, for use by its students, from the Technology Company,

involving $5,000 or more (said payment of $350,000 representing a

payment by the Technology Company to AMG of $50 for each computer

purchased by PA Cyber in 2009 and 2010).

All in violation of Title 18, United States Code, Section

666(a)(1)(B).

-16-

COUNT FIVE

(18 U.S.C. §666(a)(1)(B))

Fraud Involving Computer Purchasesby PA Cyber in 2011


38. The allegations of Paragraphs 1 through 3 above are

realleged and incorporated herein by reference thereto as though

they were fully set forth herein.

39. At all times material to this Indictment, PA Cyber

was an organization that received federal funds in excess of

$10,000 during the one-year period beginning January 1, 2011, and

ending December 31, 2011.

40. At all times material to this Indictment, Defendant

NICHOLAS TROMBETTA, as Chief Executive Officer of PA Cyber was an

"agent" of PA Cyber as defined in Title 18, United States Code,

Section 666(d)(1). His duties included supervision over the

procurement process whereby PA Cyber entered into contracts for

goods and services on behalf of its students, such as the purchase

of computers for use by PA Cyber students.

41. The allegations of Paragraph 5 above regarding AMG

are realleged and incorporated herein by reference thereto as

though fully set forth herein.

-17-

42. At all times material to this Indictment, a

technology company known to the grand jury (hereinafter Technology

Company) manufactured computers for use in the on-line cyber

education market. In 2011, the Technology Company was awarded a

contract to supply laptop computers to PA Cyber for use by PA

Cyber's students. This contract involved the sale by the

Technology Company to PA Cyber of 4000 laptop computers in 2011.

43. In and around July of 2011 in the Western District

of Pennsylvania, Defendant NICHOLAS TROMBETTA did accept and agree

to accept, a thing of value, that is, a payment totaling $200,000

from the Technology Company to AMG, intending to be influenced and

rewarded in connection with a transaction and series of

transactions of PA Cyber, that is, the purchase of computers by PA

Cyber, for use by its students, from the Technology Company,

involving $5,000 or more (said payment of $200,000 representing a

payment by the Technology Company to AMG of $50 for each computer

purchased by PA Cyber in 2011).


666(a)(1)(B).

-18-

COUNT SIX

(18 U.S.C. §371)

Tax Conspiracy


THE CONSPIRACY AND ITS OBJECTS

44. From in and around January 2006 and continuing

thereafter until in and around July 2012, in the Western District

of Pennsylvania and elsewhere, the defendants, NICHOLAS TROMBETTA

and NEAL PRENCE, did knowingly and willfully conspire and agree

together and with other persons, including Elaine Trombetta Neill

(not charged herein), to defraud the United States, that is, they

did conspire to impede, impair, obstruct and defeat the lawful

functions of the Internal Revenue Service of the United States

Department of the Treasury in the proper and accurate

ascertainment, computation, assessment, and collection of revenue,

that is, income taxes.

45. The allegations of Paragraphs 1, 6, 10 and 11 above

regarding Defendant NICHOLAS TROMBETTA are realleged and

incorporated by reference as though fully set forth herein.

46. The allegations of Paragraph 5 and 6 above regarding

the Avanti Management Group (hereinafter AMG) are realleged and


-19-

47. The allegations of Paragraph 7 above regarding the

Ohio based cyber school known as Buckeye Online School for Success

(hereinafter BOSS) are realleged and incorporated by reference as

though fully set forth herein.

48. The allegations of Paragraph 8 above regarding the

company known as Wingspan, LLC (hereinafter Wingspan) are realleged

and incorporated by reference as though fully set forth herein.

49. The allegations of Paragraph 9 above regarding

One2One Enterprises (hereinafter One2One) are realleged and


50. Some time after the creation of AMG in 2008 a

company named PALATINE was created as a wholly owned subsidiary of

AMG. Palatine was used, among other things, to purchase and manage

real estate and airplanes. Palatine was wholly owned by AMG and

thus subject to the direction and control of Defendant NICHOLAS

TROMBETTA. For instance, in late 2010, at the direction of the

defendant, NICHOLAS TROMBETTA, Palatine purchased a twin engine

airplane from a person known to the grand jury for the sum of

approximately $300,000.

51. It was the object of the conspiracy to conceal the

true nature, source and amount of the income of the Defendant,

NICHOLAS TROMBETTA. This was accomplished by diverting such income

to AMG, where it accumulated for his future use, and to One2One,

-20-

where it was available as current income. This was done in order

to defraud the IRS by impeding, impairing, obstructing and

defeating the lawful functions of the IRS in the ascertainment,

computation, assessment, and collection of revenue, that is, income

taxes, from the Defendant, NICHOLAS TROMBETTA. In so doing, the

defendant, NICHOLAS TROMBETTA, also concealed his position as the

direct beneficiary and recipient of funds generated by PA Cyber,

the school wherein he held the position of CEO. Thus, the

Defendant, NICHOLAS TROMBETTA, by concealing his true income from

the IRS, also attempted to avoid public discovery and scrutiny of

his conflict of interest as the controlling party on both sides of

transactions involving PA Cyber and NNDS, and then, in turn, as the

controlling party on both sides of transactions between NNDS and

AMG, and AMG and One2One. In this manner, the Defendant, NICHOLAS

TROMBETTA, was able to ensure the continued flow of money from PA

Cyber, a public entity funded by local, state and federal tax

revenues, to entities he controlled and benefitted from.

MANNER AND MEANS OF THE CONSPIRACY

52. It was a part of the conspiracy that Defendant

NICHOLAS TROMBETTA, in his role as CEO of PA Cyber, had the means

to influence and exert control over PA Cyber's contracts and its

payments to third parties.

-21-

53. It was a part of the conspiracy that in late 2005

and/or early 2006 Defendant NICHOLAS TROMBETTA created a company

named One2One and had his sister, Elaine Trombetta Neill, put her

name on it as owner/operator.


NICHOLAS TROMBETTA had signatory authority on the bank accounts of

One2One.


NICHOLAS TROMBETTA created AMG and selected four straw owners to be

put in place to hold and manage assets for him until an unspecified

future time when Defendant NICHOLAS TROMBETTA would assume

ownership of AMG, overtly, by causing the straw owners to

relinquish a substantial portion of their "on paper" ownership

interest to him, leaving him with an overt controlling interest in

AMG.

56. It was a part of the conspiracy that through

management contracts between PA Cyber and NNDS, and between NNDS

and AMG, both of which were put in place by Defendant NICHOLAS

TROMBETTA, that Defendant NICHOLAS TROMBETTA created a multi

million dollar revenue stream that started at PA Cyber and flowed

through to AMG. It was further a part of the conspiracy that

Defendant NICHOLAS TROMBETTA did not disclose to the boards of

-22-

directors at PA Cyber and NNDS that he was personally profiting

from the revenues that flowed from PA Cyber to NNDS to AMG.


NICHOLAS TROMBETTA had full access to, and use of, the funds of

both AMG and One2One. During the time frame of the conspiracy

Defendant NICHOLAS TROMBETTA engaged in, and caused, multiple

transactions using the funds of AMG and One2One which were of

personal benefit to him, to his family members and his friends.

Among the many examples of these transactions are the following:

a. In July of 2009 Defendant NICHOLAS TROMBETTA caused

AMG to purchase the residence of his then girlfriend, an

individual known to the grand jury as KD. This property,

located at 108 Edwards Street in Mingo Junction, Ohio,

was purchased by AMG for $73,000. The property had been

purchased by KD in 2003 for $34,000.

b. In November of 2010 Defendant NICHOLAS TROMBETTA

caused AMG (through Palatine) to purchase his own former

residence at 1816 Norton Place in Steubenville, Ohio. As

a result of this transaction AMG paid off a lien on the

property which was in Defendant NICHOLAS TROMBETTA'S name

in the amount of $110,310. Also, as a part of this

transaction, a Palatine check in the amount of $47,695

-23-

was made out to Defendant NICHOLAS TROMBETTA and

subsequently deposited into the One2One bank account.

c. In April of 2011 Defendant NICHOLAS TROMBETTA

caused AMG to purchase a four bedroom, five bathroom

condominium located at 23717 Trevi Court, Bonita Springs,

Florida, 34134, for $933,000. Although the property was

paid for in full by AMG (through Palatine) it was

initially titled in the name of Defendant NICHOLAS

TROMBETTA. In December 2011 the property was transferred

into the name of Palatine.

d. On or about January 3, 2012, Defendant NICHOLAS

TROMBETTA caused AMG to issue a check, dated December 30,

2011, to One2One for $90,000. Defendant NEAL PRENCE

characterized this check to AMG personnel as being for

"year end services" when in truth and in fact, as

Defendant NICHOLAS TROMBETTA and Defendant NEAL PRENCE

both well knew, One2One provided no services at all to

AMG.

e. Throughout the period of the conspiracy Defendant

NICHOLAS TROMBETTA caused employees of AMG, and their

spouses, to make financial contributions to political

candidates of Defendant NICHOLAS TROMBETTA's choosing.

When AMG employees made such contributions, out of their

-24-

own checking accounts so as to make the checks appear to

be from them, they were reimbursed from the funds of AMG.

By this means Defendant NICHOLAS TROMBETTA directed

payments of more than $40,000 to political candidates of

his choosing using the funds of AMG.


NICHOLAS TROMBETTA, throughout the period August 2008 through June

2012, caused AMG to issue checks, on a periodic basis, in amounts

up to $18,000 per month, to One2One even though One2One provided no

services or anything of value to AMG. Throughout the period of the

Indictment, Defendant NICHOLAS TROMBETTA had access to, and use of,

the funds deposited to the accounts of One2One.

59. It was a part of the conspiracy that the checks

issued to One2One by AMG were recorded in the books and records of

AMG as "consulting fees" even though, as Defendant NICHOLAS

TROMBETTA well knew, One2One was not providing anything of value to

AMG. This was done to conceal income flowing to Defendant NICHOLAS

TROMBETTA.


NICHOLAS TROMBETTA directed third parties to forward funds that

were intended for him to One2One to be deposited into the accounts

of One2One and recorded on the books of One2One, even though in

truth these funds were income to Defendant NICHOLAS TROMBETTA.

-25-

61. It was a part of the conspiracy that Defendant NEAL

PRENCE and Defendant NICHOLAS TROMBETTA caused income attributable

to Defendant NICHOLAS TROMBETTA to be reported on the federal

income tax returns of Elaine Trombetta Neill on Schedule C, Profit

or Loss from Business – in this case One2One, attached to her

return, instead of on the returns of Defendant NICHOLAS TROMBETTA,

as the income should have been reported.


PRENCE and Defendant NICHOLAS TROMBETTA caused income attributable

to Defendant NICHOLAS TROMBETTA to be reported on the tax returns

of each of the four straw owners of AMG, instead of on the returns

of Defendant NICHOLAS TROMBETTA, as the income should have been

reported.


PRENCE knowingly prepared federal income tax returns for Defendant

NICHOLAS TROMBETTA, for the period 2006 through 2011, which greatly

understated the income of Defendant NICHOLAS TROMBETTA.


PRENCE prepared two different sets of computations of the annual

federal income tax returns for each of the four "on paper" owners

of AMG. One of these computations showed the actual or true income

and the tax that was due based on what each "on paper" owner

actually earned from his or her AMG salary -- no return was filed

-26-

based on these computations. The second set of computations, which

resulted in a return being filed with the Internal Revenue Service,

showed income and tax due based on what the "on paper" owner would

have received if they had actually received a proportionate share

of the profits of AMG (which they did not). This practice of

preparing two sets of computations for each of the "on paper"

owners -- only one of which was actually filed with the IRS -- was

done for the purpose of having the "on paper" owners report income

on their federal income tax returns which should in fact have been

reported on the returns of Defendant NICHOLAS TROMBETTA. At all

times during the years in question, Defendant NEAL PRENCE was fully

aware that none of the four "on paper" owners ever actually

received the purported net income of AMG, although PRENCE reported

this income on their federal income tax return each year. When the

federal income tax returns with the additional federal income tax

due for each of the four “on paper" owners was filed with the IRS,

the tax was paid with funds from the AMG bank account, not from the

funds of each of the four "on paper" owners.


NICHOLAS TROMBETTA and Defendant NEAL PRENCE, in and around June

and July of 2012, collaborated on the creation of a company called

Presidio Education Network, LLC, a company that was to be wholly

owned by Defendant NICHOLAS TROMBETTA. This company was to be used

-27-

by Defendant NICHOLAS TROMBETTA to send invoices to AMG to drain

away the money that had accumulated in the AMG bank accounts.

66. It was a part of the conspiracy that throughout the

period 2006 through 2012, Defendants NICHOLAS TROMBETTA and NEAL

PRENCE shifted more than $8,000,000 in income attributable to

Defendant NICHOLAS TROMBETTA to the federal income tax returns of

other persons, that is his sister, Elaine Trombetta Neill and the

four "on paper" owners of AMG, so that the true income of Defendant

NICHOLAS TROMBETTA was concealed from legitimate taxing

authorities.

OVERT ACTS

67. In furtherance of the conspiracy and to effect the

objects of the conspiracy, the following overt acts, among others,

were committed in the Western District of Pennsylvania and

elsewhere:

a) In 2006 Defendant NICHOLAS TROMBETTA deposited and


payments from BOSS and Wingspan that came through Martlin

Management;

b) In 2006 Defendant NICHOLAS TROMBETTA deposited and


payments directly from BOSS;

-28-

c) In 2007 Defendant NICHOLAS TROMBETTA deposited and


payments from BOSS;

d) In 2008 Defendant NICHOLAS TROMBETTA deposited and


payments from BOSS;

e) Throughout the calendar year 2008, Defendant NICHOLAS

TROMBETTA caused AMG to issue checks to One2One, on a periodic

basis, in an aggregate amount of $30,000;

f) Throughout the calendar year 2009, Defendant NICHOLAS



g) Throughout the calendar year 2010, Defendant NICHOLAS



h) Throughout the calendar year 2011, Defendant NICHOLAS



i) Throughout the calendar year 2012, up through

approximately June of 2012, Defendant NICHOLAS TROMBETTA caused AMG

to issue checks to One2One in an aggregate amount of at least

$18,000;

-29-

j) Defendant NEAL PRENCE prepared a joint federal income

tax form 1040 for Elaine Trombetta Neill for the calendar year 2006

which was filed by Elaine Trombetta Neill on or about June 12,

2007, which contained false and misleading information concerning

the income and expenses of One2One;

k) Defendant NEAL PRENCE prepared a joint federal income





l) Defendant NEAL PRENCE prepared a joint federal income





m) Defendant NEAL PRENCE prepared a joint federal income


which was filed by Elaine Trombetta Neill on or about April 1,



n) Defendant NEAL PRENCE prepared a joint federal income


which was filed by Elaine Trombetta Neill on or about September 19,

-30-



o) On or about May 27, 2009, Defendant NICHOLAS TROMBETTA

caused AMG to issue 3 checks, AMG check 1301 ($20,000), AMG check

1302 ($20,000) and AMG check 1303 ($10,000), to NICHOLAS TROMBETTA

in the total amount of $50,000;

p) On or about October 26, 2009, Defendant NICHOLAS

TROMBETTA caused AMG to issue a check (AMG check #1487) to One2One

in the amount of $12,000;

q) On or about November 20, 2009, Defendant NICHOLAS



r) On or about December 26, 2009, Defendant NICHOLAS



s) On or about January 29, 2010, Defendant NICHOLAS



t) On or about June 16, 2010, Defendant NICHOLAS



-31-

u) On or about December 2, 2010, Defendant NICHOLAS



v) On or about January 31, 2011, Defendant NICHOLAS



w) On or about June 30, 2011, Defendant NICHOLAS



x) On or about December 30, 2011, Defendant NICHOLAS



y) On or about April 19, 2011, Defendant NEAL PRENCE

prepared and caused to be filed, a joint federal income tax return

form 1040 for the calendar year 2010 which contained information

concerning the income and expenses of RB and which falsely

overstated the amount of income attributable to RB and the tax due

and owing thereon;

z) On or about April 19, 2011, Defendant NEAL PRENCE



concerning the income and expenses of BG and which falsely

-32-

overstated the amount of income attributable to BG and the tax due

and owing thereon;

aa) On or about April 19, 2011, Defendant NEAL PRENCE



concerning the income and expenses of RM and which falsely

overstated the amount of income attributable to RM and the tax due

and owing thereon;

bb) On or about April 19, 2011, Defendant NEAL PRENCE



concerning the income and expenses of JP and which falsely

overstated the amount of income attributable to JP and the tax due

and owing thereon;

cc) On or about April 17, 2012, Defendant NEAL PRENCE



concerning the income and expenses of RB and which falsely

overstated the amount of income attributable to RB and the tax due

and owing thereon;

dd) On or about April 19, 2012, Defendant NEAL PRENCE



-33-

concerning the income and expenses of BG and which falsely

overstated the amount of income attributable to BG and the tax due

and owing thereon;

ee) On or about April 17, 2012, Defendant NEAL PRENCE



concerning the income and expenses of RM and which falsely

overstated the amount of income attributable to RM and the tax due

and owing thereon;

ff) On or about April 17, 2012, Defendant NEAL PRENCE



concerning the income and expenses of JP and which falsely

overstated the amount of income attributable to JP and the tax due

and owing thereon;

gg) Presidio Education Network, LLC, located at 922

Rhovanion Drive, East Liverpool, Ohio 43920, was created by

Defendant NICHOLAS TROMBETTA in or around July of 2012;

hh) On or about June 25, 2012, Defendant NICHOLAS

TROMBETTA and Defendant NEAL PRENCE discussed the manner and means

of getting money out of AMG and into Presidio.


371.

-34-

COUNT SEVEN

(26 U.S.C. §7206(1))

Nicholas Trombetta False Tax Return for 2007


68. Paragraphs 44 through 67 are incorporated by

reference as though fully set forth herein.

69. That on or about April 24, 2008, in the Western

District of Pennsylvania, the defendant, NICHOLAS TROMBETTA, a

resident of East Liverpool, Ohio, did willfully make and subscribe

a form 1040 federal income tax return for the calendar year 2007,

which was verified by a written declaration that it was made under

the penalties of perjury and which NICHOLAS TROMBETTA did not

believe to be true and correct as to every material matter. That

form 1040 federal income tax return, which was prepared and

electronically filed in the Western District of Pennsylvania and

was filed with the Internal Revenue Service, stated that NICHOLAS

TROMBETTA had adjusted gross income only in the amount of $206,099

whereas, as NICHOLAS TROMBETTA then and there well knew, for the

calendar year 2007, he had substantial additional unreported

income.

In violation of Title 26, United States Code, Section

7206(1).

-35-

COUNT EIGHT

(26 U.S.C. §7206(1))





71. That on or about March 9, 2009, in the Western







form 1040 federal income tax return, which was prepared and


was filed with the Internal Revenue Service, stated that NICHOLAS




income.


7206(1).

-36-

COUNT NINE

(26 U.S.C. §7206(1))





73. That on or about March 15, 2010, in the Western







form 1040 federal income tax return which was prepared and


was filed with the Internal Revenue Service stated that NICHOLAS




income.


7206(1).

-37-

COUNT TEN

(26 U.S.C. §7206(1))


















income.


7206(1).

-38-

COUNT ELEVEN

(Title 26 U.S.C. §7206(1))


















income.


7206(1).

-39-

CRIMINAL FORFEITURE ALLEGATION

78. The United States hereby gives notice to the

defendant, NICHOLAS TROMBETTA, charged in Counts One through Five,

that, upon his conviction of any such offense, the government will

seek forfeiture in accordance with Title 18, United States Code,

Section 981(a)(1)(C) and Title 28, United States Code, Section

2461(c), which require any person convicted of such offenses to

forfeit any property constituting or derived from proceeds obtained

directly or indirectly as a result of such offenses, including but

not limited to the following:

A sum of money equal to at least approximately $990,000

in United States currency;

79. If any of the above-described forfeitable property,

that is cash in the amount of $990,000, as a result of any act or

omission of the defendant:

(a) cannot be located upon the exercise of due

diligence;

(b) has been transferred or sold to, or deposited with,

a third party;

(c) has been placed beyond the jurisdiction of the

court;

(d) has been substantially diminished in value; or

-40-

(e) has been commingled with other property which cannot

be divided without difficulty;

it is the intent of the United States, pursuant to Title 21, United

States Code, Section 853(p), as incorporated by Title 28, United

States Code, Section 2461(c), to seek forfeiture of any other

property of the defendant, NICHOLAS TROMBETTA, up to the value of

the forfeitable property described in this forfeiture allegation.

(Title 28, United States Code, Section 2461(c); Title 18,

United States Code, Section 981(a)(1)(C); Title 21, United States

Code, Section 853(p)).

A True Bill,

__________________________FOREPERSON

_____________________________DAVID J. HICKTONUnited States AttorneyPA ID No. 34524

-41-

INDICTMENT COUNTS ONE THROUGH THREE...

Documents

Transcript of INDICTMENT COUNTS ONE THROUGH THREE...